Tuesday, October 13, 2015

How many of you will agree with me if I state that the
changes in climatic patterns had made the Syrian drought(2002) two or three
times more likely, leading to the migration crisis ? The statement can be more
convincing if you could recollect the Russian heat wave in 2010, that destroyed
the country's wheat crop. It lead to the ban on grain exports, shooting up
world food prices, pushing 44 million people below the poverty line across 28
countries. Scientists have proved that Climate change has indeed displaced
people from their land, relinquishing stability.

The loss of mesic trees in the Sudan-Sahel zone,
switching off of Northern seas from polar to more temperate species, the"water war" in Bolivia have
all been similarly authenticated. The most recent being the finding of 2014 as
the 'hottest year' since modern records began, around 1850. However, future climatic
changes can be described only within a range of uncertainty.

To be precise, as the definition goes, Climate change
is the statistical distribution of weather patterns when that change lasts for
an extended period of time. Rising global temperature,extreme heat waves,frequent
droughts,heavy rainfalls are the end results. Enough and more evidences of
catastrophes have added thrust to the definition over the years across the
globe. It is an undeniable theory that the effects of climate change are more
inclined towards anthropogenic activities- Greenhouse gas(GHG) emissions.

The greenhouse effect is not a new phenomenon. But it
has turned into a growing problem over the years. Carbon dioxide (CO2), the main
greenhouse gas has boosted economies of richer countries, since the advent of industrialisation.With
the rising emissions since then, our annual CO2 emissions are now at an
all-time record level of nearly 40 billion tonnes per year.

The alarm bells started ringing by the beginning of
the 1960s. It was duly heard by the United Nations, which promptly formed the
Inter- Governmental Panel on Climate Change(IPCC). The subsequent Earth Summit
held at Rio reflected the reports and views of around 400 scientists about
global warming. Since then, countries have resorted to tackling climate change
to avoid dangerous consequences in the future. An agreement, United Nations
Framework Convention on Climate Change(UNFCC,1992) was signed incorporating all
major economies and polluters.

If Montreal Protocol (1987) urged nations to act
against the depletion of ozone layer, Kyoto Protocol(KP), the brainchild of
UNFCC, in 1997, formulated an international legal binding on emission reduction
targets on member countries. KP was weighed on the premise that global warming
exists and that man-made CO2 emissions have caused it. The protocol worked on
the principal of"Common but
differentiated responsibilities", entrusting more obligations upon
developed nations( Annex I Parties).KP's first commitment period started in
2008 and ended in 2012. However, it did not acquire enough wings as the US
relentlessly seemed to kill the Kyoto, which it never ratified.

Also, the Conference of Parties(COP) which met every
year to discuss Climate Tackling soon turned into "Climate Tourists” (as put by Richard Black, BBC Reporter,2006).
While countries are leisurely talking about climate action, GHG emissions have
been rising steadily with industries emitting about 600 billion tonnes of
CO2,thanks to fossil fuels(1992-2013). As a result, the level of greenhouse
gases in the atmosphere have risen dramatically, by more than two- fifths. That
is, our planet is now absorbing more energy from the sun than is escaping back
into space.

The global pondering on Climate change has eventually transformed into a North-South face-off. If
the current consequences of climate changes can be attributed to the
imperialistic 'North’ countries, then the future implications will be surely on
the shoulders of the emerging 'South’ economies. As it is evident from the
fact, carbon emissions per capita in the developed world were about five times
those in developing countries.On the contrary, figures are now pointing right
in the face of the developing nations where the emissions have doubled, especially
in China where it tripled!!.The target that has been set since the KP, is to
limit the rise of global temperature by 2C. It was an achievable target until
few years back when due time was on our side. Much of the time has been wasted
deliberating the agendas of the two blocs. While the North advocates for an Environmental
Justice - ‘minimise overall cost and maximising total welfare’, South pitches
for an Compensatory Justice systems with an emphasis on historic distributive
inequities.However, the advanced nations have agreed to bear more of the burden
with a sense of charity, brushing aside historic culpability. Emission pledges
of South will be at the cost of providing decent standards of living that
contemporary technology can offer to its citizens. Rich countries have to shift
their focus from Gross Domestic Product (GDP) to internal redistribution and
changing lifestyles, which could in fact improve the quality of its citizens.
In tandem, Developing world has to reorient its growth in cleaner, efficient
and greener directions. Fortunately, the stand-off is been facilitated,
reaching a point where centrist disposition is giving way to potential new articulations
ahead of the Paris meet in November this year.

Per Capita emissions of 2.1 tonnes is a meagre figure
for India, comparatively.As the nation is striving to achieve prosperity;alleviating
poverty and furnish its people with the basic necessities,climatic aberrations
have been the evolving problem.The country has often felt the hapless effects
of global warming, not to mention the series of droughts and floods.Therefore,
it cannot rely on the actions of developed nations and it is high time the
government and the leaders ‘walk the talk’ on emission cuts. The fact about
rising CO2 emission is out in the broad daylight.It is nothing but
poorer,age-old technology and inefficient mechanisms in place.Mr.Modi, an
aspiring to-be global leader,urged nations to eradicate poverty to attain
sustainable development at the recently held United Nations Sustainable
Development Goal(UNSDG) conference at its headquarters.The speech was
culturally and organically oriented as he related earth to mother. But the PM’s
dilemma begins with growth and ends with environment. If he chooses the latter,
a generation of people will miss the bus to prosperity.He can definitely make a
breakthrough by broadening the renewable energy scheme that he implemented in
his territory when he was the CM.

As Paris is gearing up for a ‘globally warming’
mediation, nations (both north and south) have acted swiftly, rather
proactively, by pledging future emission targets and climate aids. Intended
Nationally Determined Contributions (INDC) acted as the pathbreaking principle
to keep every nations on board in the run up to the Paris conference. It calls
for an amicable voluntary contributions(Bottom-Top approach) in contrast to
legal binding and strict emission targets(Top-Bottom approach). Switzerland was
the first country to formally communicate its pledging ( 50% GHG by 2030)
followed by the European Union (EU) with 40% reduction.The capitalistic and the
communistic power came to the fray when Mr.Obama and Mr.Keqiang declared
unconditional ‘War on Coal and War on Pollution ‘ respectively. The US, refuter
of KP, pledged a reduction cut of 26-28% by 2025 while China, World’s largest
greenhouse gas emitter promised a reduction rate of 60-62%/GDP.India, too has
pledged a reduction averaging 35-40%, which is a prospective approach.

May the city of lights showers its hope on all of us
and sustain our Mother Earth !.

Wednesday, October 07, 2015

The
tiny Himalayan kingdom of Nepal has not seen peace after it became a federal
democratic Republic. At a time when, adopting a constitution is cheered as a
gateway to the peaceful transition of the democratic process all over, the
Nepali experience was little too bitter.

Sharing
a 1751 Km border with Nepal, India has all reasons to be apprehensive over the
political crisis that is spreading its tentacles across Nepal to Indian territories.
On September 20, 2015, Nepalpromulgated
its secular and democratic constitution, dividing the Himalayan landmass into
seven federal provinces for administrative purposes. The 65-year quest for a
democratic development from the monarchical rule was finally fructified.
Needless to say, it did not go well with the Madhesi tribe who inhabited the
Southern Nepal (or the Terai region). Incidentally the same region houses half
of the country's population, in spite of it constituting only 1/5 of the total
landmass. Drawing support from Tharus( another tribe from the same region), the
Madhesis are in arms against the long-sought political development of the
country.

Undoubtedly,
the aforementioned are internal affairs of a nation, to which no external power
possess a right to intervene. However, given the volatile situation in the
Terai region, a direct implication on its closest neighbour- state of Bihar, in
India cannot be cast into oblivion. Bihar is the new eye-candy for the
power-brokers for India. Both the ruling and the opposing sides (Nitish Kumar's
Janata Dal (United), BJP and Congress) are in no mood to cede a defeat on any
grounds. Slated for polls this month, the prolonged political impasse in Nepal
is a natural cause to worry.

This
leaves us to ponder about the role of Madhesis, in the present political
stalemate. They have been demanding for equal representation/participation within
the revised political structure of Nepal. Ironically the modernity embraced by
the new constitution is immaterial to them. Interestingly, Nepali constitution
is the first in Asia to protect the rights of the Lesbians, Gays, Bisexuals and
Transgender communities. Intriguingly, the religious /cultural freedom
enshrined in the constitution which also safeguards the ancient
religious/cultural practices or one which considers proselytizing illegal will
find fewer takers in a kingdom which was officially labelled under the garb of
religion for centuries. The latter is reflective of the fears of widespread
conversions to Christianity amongst the low caste groups. The discrepancies
related to citizenship rights of women are another bone of contention.

India
will seek for a peaceful resolution of the political disputes. At the same
time, an institutionalized acceptance of the new constitution is imminent for
the political future of Nepal. Adding oil to the fire, the fuel crisis that has
presently evolved in Nepal is pointing its fingers towards a covert Indian
scheme to impose a trade blockade. Over 6000 trucks are stranded in the
Indo-Nepalese borders carrying essentials like petroleum products, cooking gas,
and several other food and non-food items. Though the topography poses a hurdle
for Nepal to re- route its supplies via China, the opportunity cannot be wholly
disregarded. The Chinese maneuvers to ride along with an enemy's enemy (Nepal
holds India responsible for the trade blockade, and anti- India slogans are
also rampant in Nepal) will prove detrimental to Indo-Nepalese relations.
Another alternative route is the Sunauli border in Uttar Pradesh (India) for
trade in essentials to offset the blockade. Rationing of commodities has
already begun, however it will be difficult to meet the desired demands of the
people.

Imposing
a trade blockade is not new amongst nations, especially if a political crisis
is engulfing the nation a under question. The Indian case is ironic here.
Speculations are rife over the protracted Indian role in this regard, even when
the political elite are calling for a peaceful resolution of the crisis. If
this blockade is a scheme implemented keeping in mind the Bihar elections, then
it is a serious aberration of our foreign policy that violates undue
interference in the internal affairs of another country. The official statements
are also questioning the inclusivity of the new constitution. In the name of
border security, and by capitalizing the fears of the Indian owned/run freight
operators, it looks like some vested parties in India are also adding fire to
the political imbroglio in Nepal.

The
spillover effects of the crisis has already resonated itself in the aviation
sector, with major international flights bound from Nepal being cancelled.
Nepal is yet to stabilize the conditions post the devastating earthquake of
April 2015. The people are in dire need of a political transformation to start
anew. Surely, the opposing sides getting itself embroiled in a dirty game. A
feudal re-structuring as demanded by the Madhesis and the Tharus will not be
easy. It remains to be seen how the 14- day old constitution will attempt to
ensure a proportionally based representation and a population-based delineation
of electoral constituencies as demanded by the opposing factions. A minority is
putting the majority to ransom here. The Communist party of Nepal - Unified
Marxist Leninist (UML), and its votes will decide the fate of the
constitutional amendments. Being a nascent democracy, the political factions
across Nepal should abstain from manipulating the fragile atmosphere to stall
the long sought democratic development in the country.

Any
build-up of an anti-India fervour in Nepal will affect the cordial ties between
the two nations. History and geography have reinforced this indomitable
connection between the countries. The effigies of the Prime Minister, Shri.
Narendra Modi is now being burnt publicly. Nepal being reliant on India for 60%
of its imports is on the verge of another humanitarian crisis. Being a major
trading partner with Nepal, the Indian political elite need to do the needful
to recover the lost image of a faithful ally.

* The Author is Managing Associate of CPPR Centre for Strategic Studies (CSS). Views are personal

Monday, October 05, 2015

Oil as a commodity has come to
run the world for a long time now. It influences other commodity pricing and
world power. The OPEC member countries have had the power over oil production,
with Saudi Arabia contributing the maximum to the production and exports.
However, the ever increasing oil prices have received a jolt several times in
the past with the prices falling, causing an impact on the oil exporting
countries. Oil prices have dropped to $ 50 a barrel since mid-2014 from $ 105
per barrel. Though quite a few parallels could be drawn from the 1986- 87 fall
in prices, few other independent causes also lead to the fall of oil prices.

The shale oil production in the US which increased about 70% since 2008
decreased the dependency for the US to import oil from the OPEC nations,
causing a drop in oil prices. During the period of 1986-87 also the world
witnessed an increase in the supply of oil from oil tanks in North Sea and
Mexico because of which oil dropped from $24 per barrel to $9.62 per
barrel.

Second, the increase in supply
on both the occasions did not induce Saudi Arabia to reduce it’s supply of oil,
with an intent to keep up the market share for oil, Saudi Arabia continued to
supply the same amount of oil which pulled the prices down.

The third reason for the fall in
oil prices is the slowdown in China’s economy which is the largest consumer of
oil with a manufacturing driven economy. Also, the oil production in Libya and
Israel continued even amidst the political crisis. The EIA thus estimates that
by early 2016, the world oil supply could supersede the world demand.

Taking a quick look at the
gainers and losers because of the fall in oil prices, it could be well noted
that the oil exporting countries would be the largest losers because of the
fall. The oil exporting countries make 80% of their total revenue by exporting
oil. If the prices continue to fall then these oil exporting countries would
make low returns on their investments, which is not profitable. On the flip
side, the oil importing countries could make benefit of this low price with oil
now costing less and reducing the budget deficit for the Government. Additionally the low oil prices could drive
as a factor to control inflation, with the prices of other commodities falling.
This will ideally give the Central Bank of the oil importing country an inch
over policy accommodations.

India, the fourth largest oil importing
country could save a fortune because of the fall in prices, 51% from August
2014. Analysing the trends of CAD, inflation and policy rates by RBI could well
substantiate whether India is able to gain benefit from this short time fall.

1.Current
Account Deficit – As an oil importing country, the fall in oil prices gives us
an opportunity to reduce the Current Account deficit. Evidently, the deficit
has narrowed to 6200 USD Million in the second quarter of 2015 from 8200 USD
Million earlier this year. The major reason for this fall in deficit could be
directly proportionate to the fall in oil prices. In context, a 1$ fall in oil
prices from January 2015 to July 2015, decreased the Government deficit by 24%
in 7 months.

2.Inflation
– The slump in oil prices has been able to reduce CPI inflation rate for India.
Fuel which has over 7% weightage in the CPI has been able to contribute to
lower the CPI inflation. The CPI inflation fell to a record low of 3.66 % in
August 2015, which is much lower than the forecasts. Inflation rate is a major
criteria for the RBI to set the interest rates. A steady inflation for a medium
term will provide room for policy accommodations by RBI to assist the borrowers
and spur the economic growth.

3.Policy
rate cuts – Taking into account the continuous fall in the oil prices which is
leading to the fall in inflation and CAD, RBI has been able to reduce the policy
rates being able to pass on the benefits to the investors. From January of this
year, RBI has cut repo rate by 125 bps. In the Monthly review in September, RBI
lowered the interest rate by 50 bps which was more than expected. The current
interest rate of 6.75% has made it possible for a few banks to pass on the
benefits to the consumer by reducing the lending rates.

4.Oil
refineries – The fall in oil prices gives India an opportunity to store oil for
the future use. India has nearly finished construction of the first phase of
Strategic Petroleum Reserves (SPR) to store crude oil in Vishakapatnam,
Mangalore and Padur. The three crude reserves can have the storage up to 5.33
million which would last for 13 days, however the International Energy Agency
recommends 90 days of storage facility. Keeping in mind the current phase of
low oil prices, this is the opportune time for India to proceed with the
strategic oil reserve (Phase 2 is being planned at Bikaner
in Rajasthan, Rajkot in Gujarat, Chandikhol in Odisha). This will help India to battle the
supply shocks of high price shocks in the future.

To summarize,
India import 80% of the total oil it consumes and it is predicted by the IEA
that by 2020 India would be the largest importer of oil. This fall in oil prices
could benefit India to reduce the burden on inflation and the import bill. Both
the Central Bank and the Government are looking out for this continuous fall in
oil prices and trying to pass on the benefit to the public. The oil exporting
countries on the other hand are encountering losses due to the steady fall in
oil prices, in fact any further fall in oil prices leaves no incentive for the
oil exporting companies to go ahead with their production. The oil price could
be easily determined by simple market forces, but the world economies carry a
market sentiment to mark their status which has made the price determination a
complicated process.